Thursday, December 31, 2015

We all try to construct stories of ourselves that make us feel well. Sometimes this is very difficult, such as when we incur in contradictions. Confirmation bias is a consequence of this. Once we have taken a position on something, we blind ourselves to evidence that may contradict this initial position, to keep our reputation in front of others and to reduce cognitive dissonance in our interior (the great economist George Akerloff was one of the first to explore the social implications of this). This is perhaps one of the reasons behind the rhetoric strategies of the new populist right in Europe. After all that happened in the XX century (two world wars, holocausts, ethnic cleansing in Europe) it is very difficult to sustain an openly fascist speech. Instead, those who take advantage of severe financial crisis to look for scapegoats and easy solutions, pay lip service to democracy and freedom... and at the same time to patriotism and nationalism. One of these parties is called "Freedom Party." Another is called "New Democracy." Others are less scrupolous and call themselves "True Finns." The new brand of the conservative Catalan nationalists (the old one being tarnished by corruption) is called "Democracy and Freedom". Like the UKIP in the UK and the National Front in France they sell themselves as the true defenders of freedom and democracy, and at the same time they demonish the foreign, the Spanish, the muslim or simply the new. Of course, embracing complexity and supporting causes that do not have easy scapegoats is much more difficult. But there is no other way if we want to avoid the tragedies of the past. Happy new year.

Friday, December 25, 2015

Don't miss the last documentary by BBC journalist Andrew Jennings about FIFA and corruption. Jennings explains how his long investigative work has been finally vindicated by the recent public exposure of corruption at FIFA, and convincingly compares the governance of global soccer to the Mafia. This is what the excellent web page "Play the Game" has to say about Jennings programme:
"The BBC today took a little wrap off what investigative journalist Andrew Jennings’ latest Panorama show, airing on BBC tonight, includes.

As observers had already guessed after the U.S. Attorney General Loretta Lynch released the latest, superseding, indictment into FIFA on Thursday, the U.S. authorities now also have an eye on FIFA president Sepp Blatter, writes the BBC.

According to the BBC, the U.S. authorities have documents that could compromise Blatter’s denial of wrongdoing in relation to the ISL scheme through which FIFA officials received more than 100 million euro in bribes from sports marketing company ISL for World Cup rights deals during the 1990’s.

In a letter obtained by the FBI, former FIFA president João Havelange writes that Blatter had “full knowledge of all activities” and was “always apprised to them”, writes The Guardian.

In May 2013, FIFA’s adjudicatory arm of the ethics committee cleared Blatter of wrong-doing in relation to the ISL affair. He may have been "clumsy" but his conduct "could not be classified in any way as misconduct with regard to any ethics rules," stated the FIFA report at the time.

A set of rather extensive reforms was presented to the FIFA executive committee on Dec 3, the same day that Swiss authorities made a second set of arrests and another 16 FIFA officials were indicted by the U.S. Attorney General’s office making the total number of defendants reach 27."

Wednesday, December 23, 2015

"The Economist" wrote last week that its vote in the Spanish election would have gone for "Ciudadanos," a centre-right emerging political party. That is, emerging at the national level, because in Catalonia they have been around for more than a decade. However, the result of "Ciudadanos" has been disappointing, with 40 seats out of 350, much below the expectations. Instead, in the Catalan regional election two months ago, Ciudadanos obtained an excellent result, becoming the second group in Parliament after the secessionists. What happened between the Catalan and the Spanish election? Of course, a rigorous answer to this question deserves the attention of the best political scientists. My only suggestion to them is to look at the influence of their "getting out of the closet" in economic policy. By the Catalan election, "Ciudadanos" was an anti-Catalan nationalist party, concerned about corruption and political renewal (that is why it didn't use the word "party" in its name). It did not run on a very specific economic policy platform. Just one week before the last European election, their leader Albert Rivera said that they were indifferent between going to the socialist or the liberal group in the European Parliament (after the election, they went to the liberal group). But at the national election they couldn't escape the ideological issue. What they did was to commission their economic program to a high calibre Spanish economics professor from the London School of Economics with a PhD from Chicago University, Prof. Luis Garicano. This excellent academic economist wrote almost the perfect pro-market ("less and better government") program, with the help of one of his PhD students. This gave a perfect justification to "The Economist," the magazine, to endorse them, and through this back door, support a coalition between them and the right-wing Popular Party led by the unpopular Mariano Rajoy. The great magazine found the best excuse to de facto support a leadership that had been tarnished by corruption, which could be found contradictory with past positions such as vigourously and consistently campaingning for years against Berlusconi in Italy. The clear positioning of "Ciudadanos" in the center-right with a rigourous economic policy program perhaps did a lot to get a few votes from academic economists, but did little to allow them to reach new voters or even keep those that were inclined to vote for them two months ago. It is not the first time that the input of academic economists has been detrimental in the popular vote. Another excellent economist, Michelle Boldrin, had an incredible failure in a recent Italian election as leader of a new party (the same election I believe where Mario Monti lost when trying to legitimize his tenure as a technocratic prime minister). Another example is Andreu Mas-Colell, one of the best Catalan economists: he has been in the government of Artur Mas, the leader of the Catalan secessionists, trying to give an image of seriousness to the nationalist populism that his leader was promoting, but actually becoming an unpopular cabinet member contributing to the declining popularity of his leader's party. It is not the first time that the preferences of academic economists seem to be at odds with the preferences of the general population. I am proud to be an economist, and in many aspects I am an admirer of the academic career of these scholars. But they have not been good politicians.

Thursday, December 17, 2015

Edward Glaeser has a fantastic academic article written in 2005 where he explains the relationship between soft paternalism (public interventions that do not alter the choice set) and political manipulation. He argues that departures from full rationality are endogenous and therefore subject to manipulation and vulnerable to strategies of persuasion. In Spain (including Catalonia), right wing parties and institutions controlled by them seem very aware of that: they are spending the last hours of the election campaign (for this Sunday`s general election) trying to turn the two issues that have dominated Spanish politics in the last four years into their favour. One issue has been the independence campaign in Catalonia, under the leadership of right-wing nationalist leader and president of the Catalan autonomous government, Mr. Artur Mas. And the other has been the succession of coruption scandals and the protest movements against them and simultaneously against the unequal distribution of the costs of the economic and financial crisis. In Catalonia, Mr. Mas has used all the resources of his regional government, including public broadcasters, to support the independence drive, and to promote a new elite of opinion leaders identified with this drive. Among this new elite there is a right-wing famous economist that plays an important role, Xavier Sala-i-Martín, who combines the defense of Catalan independence with the support of the ideas of radical neo-liberalism in economics, including his admiration for Ronald Reagan and the policies of the Republican Party in the USA. The bookstores are full of books by this colourful economist, who has his own program on the regional public TV. However, this program is not enough dose, so he also appeared in a routine talkshow today two days before the end of the election campaign. In Spain, the movement against corruption resulted first in the emergence of a left wing populist party, Podemos, who will still have a good result in the election. But in the last few months, a lot of the protest energies have gone to benefit an emerging party with a "laissez-faire" economic program, Ciudadanos. Their economic program has been coodinated by another famous economist, Luis Garicano, whose admiration for Margaret Thatcher is not difficult to find in the Internet. Both Garicano and Sala-i-Martín have good academic credentials, but their bias is clear and identical: they support a smaller state with lower fiscal pressure and weaker egalitarian and welfare policies. The Economist is consistent with its liberal ideology in economics when it supports a coalition of the right wing incumbent Popular Party (PP) and Ciudadanos, but fails to be consistent with its tradition for a better democracy (which it showed for example in its campaign against Berlusconi) when it thinks that a government with a party that has not come clean with its amazing corruption scandals, will be able to lead regeneration is Spain. The claim that Ciudadanos is somehow more able than PP to address the Catalan issue is ridiculous: Ciudadanos was born in Catalonia to oppose Catalan nationalism with Spanish nationalism. PP+Ciudadanos in the Spanish government guarantee that a war of nationalisms will dominate Spanish politics in the years to come. That is why old supporters of the also Spanish nationalists PP, like former MEP Alejo Vidal-Quadras, now support Ciudadanos. What Spain needs is a federal Constitution that openly recognises its diversity and that can be supported by a majority of Catalans and Spaniards. Neither PP nor Ciudadanos (nor the Catalan secessionists) are supporting that. But their economic leaders and supporters all agree that we need smaller government.

Wednesday, December 16, 2015

In the Spanish general election of December 20th, all predictions agree that prime minister Mariano Rajoy will lose his current overall majority in Parliament. This will open the door to coalition agreements. The exact outcome of the election is uncertain, and therefore it is very hard to forecast exactly what kind of alliances can be formed after the vote to choose a new government. The vote takes place after four controversial years of Mr. Rajoy in office. In these years, the Spanish banking system had to be bailed out, and corruption scandals tarnished the reputation of the party in office and the prime minister himself. The banking bailout and the corruption scandals were interconnected because one of the symbols of corruption, former IMF leader and Spanish vice-prime minister Rodrigo Rato, was himself the chairman of the largest bank that had to be bailed out (Bankia). This bailout has its origins in the economic and financial crisis that exploded when the housing bubble burst after 2008. The subsequent troubles were part of the euro and debt crisis that engulfed the European periphery and does not have only one source of causality or responsibility. But the current government has not used his four years in office to convince voters that it had a project of shared prosperity or a real will to reform democracy in realistic ways and fight corruption. In the meantime, the government has been completely unable to solve or alleviate the constitutional crisis with Catalonia, one of Spain's most prosperous regions. Quite the opposite: Mr. Rajoy has been trying to exploit this crisis to fight the election along a nationalist cleavage, instead of making federalist proposals that could be accepted by most of the Catalan and Spanish people at the same time. The institutional crisis produced by the combination of economic recession, corruption scandals and a sovereignty challenge, has been used by "emergent" populist parties like Podemos and Ciudadanos to challenge the mainstream political forces. At the same time, the Socialist Party, under a new leader, Pedro Sánchez, presents a new face with a serious program, containing proposals to address federal reform, as well as egalitarian policies in a serious fiscal framework. It is around these proposals that the alternative should be structured.

Saturday, December 12, 2015

It makes me happy that the usually despised socialdemocrats in the French government, led by Hollande, Valls and Fabius, with the support of democratic US president Obama, under the close watch of former vice-president Al Gore and the great center-left economist Nicholas Stern, have managed to engineer a global agreement in Paris to stop climate change. It also makes me happy that the leader of Greenpeance, Kumi Naiboo, is relatively happy. He also reminds us of the work and challenges ahead:
"The wheel of climate action turns slowly, but in Paris it has turned. There’s much in this deal that frustrates and disappoints me, but it still puts the fossil fuel industry squarely on the wrong side of history. Parts of this deal have been diluted and polluted by the people who despoil our planet, but it contains a new temperature limit of 1.5 degrees. That single number, and the new goal of net zero emissions by the second half of this century, will cause consternation in the boardrooms of coal companies and the palaces of oil-exporting states and that is a very good thing. The transition away from fossil fuels is inevitable. Now comes our great task of this century. How do we meet this new goal? The measures outlined simply do not get us there. When it comes to forcing real, meaningful action, Paris fails to meet the moment. We have a 1.5 degree wall to climb, but the ladder isn’t long enough. The emissions targets outlined in this agreement are simply not big enough to get us to where we need to be. There is also not enough in this deal for the nations and people on the frontlines of climate change. It contains an inherent, ingrained injustice. The nations which caused this problem have promised too little to help the people on the frontlines of this crisis who are already losing their lives and livelihoods for problems they did not create. This deal won’t dig us out the hole we’re in, but it makes the sides less steep. To pull us free of fossil fuels we are going to need to mobilise in ever greater numbers."

Thursday, December 10, 2015

Peter Emerson, director of the Borda Institute, summarizes in a recent article his ideas about referendums and similar binary decision-making processes in complex societies divided by identity and similar problems:

"Before the Edinburgh Agreement, the SNP advocated three options for the 2014 Scottish referendum: independence, devo-max and status quo. But Cameron reckoned his favourite, status quo, would win a two-option contest against independence. So binary it was. Many wanted devo-max; nobody voted for it because they couldn’t – it wasn’t on the ballot paper; yet it 'won'. Scotland’s referendum was used as ‘justification’ by those wanting separatism in Ukraine: not the Edinburgh Agreement bit, but the binary nature of the ballot.Thus the tragedy of the Balkans was repeated. In 1991, with wars already in Slovenia and Croatia, the EU's Badinter Commission insisted on referendums. As a result, there were umpteen plebiscites: a few were recognised; others, as in Herzeg-Bosna and the Sandżak, were not. But “all the wars in the former Yugoslavia started with a referendum,” (Oslobodjenje, Sarajevo’s now legendary newspaper, 7.2.1999). In 2002, a referendum was incorporated into the Machakos Protocol for South Sudan. Six months later, there was renewed violence in Darfur. After all, if one region can fight, hold a referendum, and thus gain its political objective, why not another? South Sudan has since imploded. Was it wise to promote self-determination by referendum – in a word, Balkanisation – in Africa, a continent replete with borders geographical, historical and tribal? In Egypt’s Tahrir Square, the people were united – young, old, male, female, Muslim and Copt. But then they held a referendum. Two-option voting is divisive. So they divided. And then they fought. In Iran, in 1953, 99.8 per cent voted for socialism. Ten years later, 99.9 per cent wanted capitalism. In ’79, they voted for an Islamic Republic, by (a mere) 99.3 per cent. In 2007, Venezuela held a constitutional referendum. In the first of two ballots, voters were asked to vote a single yes-or-no on a list of 33 questions; in the second, on 36. Both ballots were lost by 49 to 51 per cent. Must even the most complex of questions be reduced to a dichotomy? Stalinist results are not confined to non-western democracies: the majority in favour of the Northern Ireland border poll of 1973 was 99.7 per cent. As often happens, the majority votes in favour while the minority abstains (Crimean Tatars), boycotts (Northern Ireland nationalists), or resorts to violence (Bosnian Serbs). Where the communities are evenly balanced, as in Quebec in 1995, both sides do participate, but the outcome was in part determined by neither side. On matters of contention, then, majority voting is inadequate. As implied above, it often allows those in power to determine the question. Supposed democrats have thus abused the democratic process, but so too have unabashed dictators like Napoleon, Mussolini, Hitler, Duvalier and Saddam Hussein."

Tuesday, December 8, 2015

There is a general election in Spain on December, 20th. The ruling conservative Popular Party is running a campaign under a very simple slogan: "Spain". The reason is that the cleavage they try to exploit is the one between unity of the country or secessionism, trying to highlight the separatist threat of the Catalan nationalists (not the majotity of the Catalan electorate) as the biggest issue that the country is facing. Since this issue became a significant one three and a half years ago, the Popular Party of prime minister Mariano Rajoy has done everything in its hands to throw gasoline to the fire, and nothing to offer an institutional federal reform that could accommodate the aspirations of a big majority of Catalan society. Meanwhile, Spain is emerging from the euro crisis mainly thanks to the action and credible promises of the European Central Bank, but doing little to create the foundations of a productive economy in the mid to long run. The Spanish electorate, like the electorates of all countries in the euro-zone, support the common currency, and therefore implicitly call for strengthening the institutions that make the euro-zone stable and prosperous: this means a political and fiscal union. This increasingly federal Europe is unavoidable and desirable in the context of a common currency, and it is in this framework that it is necessary to support strategies of economic growth that serve the purpose of defeating the forces of populism or even the extreme right. In France and England, xenophobic parties of this persuasion are progressing too much and dominating the political agenda. It is a renovated European project that is needed to defeat them. By running on a Spanish nationalist platform, the Popular Party of Mariano Rajoy is also trying to hide the incredible corruption scandals that have affected them in the recent past. They are being investigated for the reception of kickbacks at a large scale, and for the reception of illegal payments to politicians, allegedly affecting even the prime minister. The Spanish electorate has alternatives. A renovated socialist party is not the kind of enthusiastic project that attracts headlines and the social media, but it is just the serious federalist center-left alternative needed by Spain.

Sunday, December 6, 2015

Simon A. Levin has aninteresting
article about the sources of social cooperation in human societies and
in other animals. He reminds us several times across the article that Hardin
(the first author to analyze the "tragedy of the commons")
argued that the solutions to commons problems involve mutual coercion,
mutually agreed upon: "Mutual coercion, mutually agreed upon, has been
successful over and over again in small societies. Arrangements such as the
lobster gangs of Maine, the water temples of Bali, and the Tribunal de las
Aguas de Valencia, all give evidence that self-organized solutions, with
emergent norms, can help protect public goods, combining top-down and bottom-up
mechanisms. As we move to larger scales, however, for example in protecting
climate or biodiversity as public goods, the challenges become greater. Recent
work demonstrates the importance of great inequities in wealth, and of
heterogeneity more generally in addressing global problems. These issues of
scale and heterogeneity led the late Ostrom to argue for a modular, polycentric
approach to addressing climate change, which means starting locally, and
building up from there. And I would argue that it also means agreements between
subsets of nations, as building blocks for larger-scale agreements; indeed,
from what we know about Darwinian selection and the evolution of
multicellularity, in which modules can become building blocks for emergent
complexity, this seems the most hopeful approach to global sustainability. The
greatest challenges to achieving a sustainable future in an increasingly
interconnected world rest in finding solutions to dealing with public goods and
common-pool resources, especially when the individual agents are nations or
distributed networks of individuals. The lessons to be derived from evolution
and evolutionary theory are a starting point, but scaling up to larger and
larger groups, in a technological world in which individuals can make
sophisticated calculations about their futures and their interests, create
novel challenges, both from the viewpoints of applications and mathematical
theory. Addressing such challenges is essential if we are to address our own
futures, and represent some of the most exciting challenges for sustainability
science." Levin believes that consensus building may be more important
than voting, in a paragraph where he could have cited the great Swedish
economistKnut Wicksell: "Of
course, the theory of how societies vote and how they should vote has been a
staple of economics and the decision sciences for many decades. In most
situations, however, the way human groups arrive at collective decisions is
much more bottom-up, based on a balance between innate tendencies and knowledge
on the one hand, and imitation on the other. What then is the role of
leadership? How is consensus achieved in democratic societies, and how
important are those who are more likely to follow than lead?"

Thursday, December 3, 2015

African nations made the mistake of leaving their status as colonies to found relatively small nation-states, instead of embracing large federations under perhaps the initial umbrella of the United Nations. Academics and intellectuals, both local and international, supported the move, just to regret it half a century later. Here's what a recent academic paper has to say about it: "From the
middle of the 19th century, most of Africa was colonized by Western powers and
the continent remained under its European overlords until independence
movements gained strength in the aftermath of WWII. The main wave of
independence started in the late 1950s and in 1960 alone, 17 countries achieved
independence. With the exception of South Sudan, the full
process of decolonization and independence was completed when Eritrea and
Namibia became independent in the early 1990. In virtually all these countries,
the key figures of their independence movements initially became the first
official leaders. All promised better conditions for the people and when Africa
stood on the edge of independence it was with the hope of prosperity. This
positive outlook was shared by Western observers, as described by Easterly and
Levine (1997, p. 1203): “In the 1960s, a leading development textbook ranked
Africa’s growth potential ahead of East Asia’s, and the World Bank’s chief
economist listed seven African countries that “clearly have potential to reach
or surpass” a 7 percent growth rate.” However, what should
have been the start of prosperity for the continent instead became what has
become known as Africa’s growth tragedy. Today,
Sub-Saharan Africa is the poorest part of the world, as a consequence of 20
years of declining GDP per capita. The decline was so massive that the average
1972 GDP level was not reached again until 2004."

Tuesday, December 1, 2015

In the 1960's soccer/football was in crisis. Stadiums were crumbling, tactics were defensive and hooliganism was dominant in the cradle of the game, the British Isles. Then a new, more offensive and modern style of play began to flourish in The Netherlands, taking inspiration from the seed that had been planted by a previous generation of Eastern European players and managers. The seed flourished in the World Cup of 1974, and then the new species evolved and mutated into even better forms in Spain and Germany. In parallel, some tragedies shocked the public authorities, who finally became determined to act against violence and crumbling facilities in England. Technological developments facilitated the expansion of the game, and judicial interventions paved the way for the internationalization of the market for players. More and more people had access to live games with the best stars of the planet, with increasing in-depth coverage of every aspect of the game. Combining all these phenomena, we see the evolving combination of markets, governments and a multiplicity of organizations (both for-profit, and not-for-profit) producing something really successful. I am sorry, but no creator was in command. Now the problems are derived from the success of the product. Soccer has become a global industry, and some disturbing associated phenomena that were minor problems when the scale of the animal was small, have now become more pervasive: corruption, politicization, child trafficking, tax competition, state aid, fiscal fraud, or the involvement of obscure olygarchs (local or foreign), are all worrying phenomena that call for reforms. The beautiful game is also a beatiful beast. The beast will probably be tamed by a combination of judicial action (as we are seeing with FIFA), but also the concerted action of expert global agencies such as CAS or WADA and organized groups of fans or worried sponsors fighting for a more democratic sport. The beast has to act to the benefit of fans without imposing costs on society at large.